Defeat shakes Argentine first couple

Argentine President Cristina Fernandez de Kirchner has suffered a stunning setback after losing absolute majorities in both houses of Congress in Sunday's mid-term elections.

In a press conference on Monday, she said that six years in power had worn thin her administration.

Her husband and predecessor, Nestor Kirchner, suffered a huge political defeat by losing his own bid for a seat in Congress in Buenos Aires province, traditional voting territory for his Peronist party.

To make matters worse, the presidential couple also lost races in key areas such as Buenos Aires city, as well as Santa Fe and Cordoba provinces.

They even lost in their own home province of Santa Cruz.

'Failed entirely'

"Their strategy was to make the vote a referendum on their popularity," says ex-Industry Minister Dante Sica.

Some consider we're seeing the end of the Kirchner cycle, but don't underestimate their capacity to recover

"The strategy failed entirely. The voters were simply tired of the government's confrontational conduct."

But there were signs early on Monday that the government had heard the voters' message.

Mr Kirchner, who led the government's faction of the Peronist party, speaking live on TV to his supporters from his headquarters in Buenos Aires, adopted a mild, upbeat and conciliatory tone.

"In a democracy, you win and you lose," he said. "This was a very close election. We lost by a bit."

The presidential couple have been used to virtual absolute control of Congress and this new tone - milder and less arrogant - say many analysts, will be essential in the months to come.

The row over taxation that pitted the Kirchners against the country's powerful farmers played an important role in their defeat, says Dante Sica.

Argentine farmers protested during a three-month tax dispute last year

"Voters became deeply disillusioned with the way the government let the crisis go on," he said.

"They did nothing to solve the crisis, there was no attempt at dialogue and no alliances formed."

Mr Sica says President Fernandez will have to change now, and be more conciliatory.

Farm leaders have increased their presence in Congress with this election, and are likely to push again for tax cuts on grain exports and less state intervention in the economy, as well as new policies for beef and milk production.

But the new Congress will not begin work until December, giving President Fernandez five months with a majority in both houses.

'Divisive proposals'

If the president insists on taking a hard line, analysts say it is possible there could be tensions, not only with farming leaders, but also with industry and the opposition.

Aldo Abram, director of the Centre for Institutional and Market Investigation of Argentina, says: "The presidential couple will not intervene in state enterprises so forcefully."

He also says the Kirchners are likely to shelve controversial proposals, such as a media bill seen by some as an erosion of press freedom.

The election result, says Mr Abram, should also help stem some of the flight of capital. During the last few months Argentines, uncertain of the future, converted their savings into dollars and moved them offshore.

But Sunday's election may also have dashed the presidential couple's hopes for the 2011 presidential race.

When President Fernandez was elected in 2007, many analysts suggested that Nestor Kirchner would compete again for re-election in 2011.

"Some consider that we are seeing the end of the Kirchner cycle," says political analyst Jorge Giacobbe, president of Giacobbe and Associates.

'Loss of prestige'

"Although we shouldn't underestimate the presidential couple's capacity to recover.

"But it is clear that there is a huge loss of prestige reflected in the defeat."

The Peronists have a presidential election in 2011 to focus on

Later on Monday, Mr Kirchner resigned from the leadership of his faction of the Peronist party leaving his ally, the governor of Buenos Aires, Daniel Scioli in charge.

He said it was the most dignified thing to do.

The Kirchners now have other powerful Peronist politicians to deal with.

The elections have brought to the fore Senator Carlos Reutemann, a Peronist centrist who is close to the farming community that the Kirchners have alienated.

This senator could now emerge as a credible candidate to lead the party.

Other hopefuls include Argentina's Vice-President, Julio Cobos, who also supports the farmers and who split from the Kirchners when he voted in the Senate against their bill on agricultural taxes in March of last year.

Much will depend on President Fernandez's ability and desire to draw these powerful players into negotiations.

But Dante Sica suggests that if and when this happens, it could create a healthier political environment, with the government finally being forced to consult Congress more.

And according to Mr Sica, the pull of the presidential election in 2011 will also have a galvanising effect.

"The Peronist party will do everything needed to maintain power," he said.

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